Stock Market Technical Analysis
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Taking a look today at what our good friends at the Fed have been doing. The chart above shows the weekly reported numbers of the Fed's balance sheet. The new balances are above each weekly bar with the net change from the previous week below each bar. The notable items are the September 17th 28 billion injection to try to stop the sell off that had already begun. They stepped in again with a 19 billion injection on October 15th to start the global short squeeze that ensued. Over the following five weeks they continued to inject liquidity long past the official end of QE.
Things changed last Wednesday, however, when they removed liquidity for the first time since October 1st, right before the market took the big dive. This past Monday's opening drop was a reaction to the Fed actually removing liquidity. After Monday's drop, it looks like they couldn't accept that kind of reaction and turned on the all powerful tractor program on the SPY which has kept running right up through Wednesday's close and is shown in the chart below.
Things changed last Wednesday, however, when they removed liquidity for the first time since October 1st, right before the market took the big dive. This past Monday's opening drop was a reaction to the Fed actually removing liquidity. After Monday's drop, it looks like they couldn't accept that kind of reaction and turned on the all powerful tractor program on the SPY which has kept running right up through Wednesday's close and is shown in the chart below.
click on image to enlarge
This tractor program tightly controlling trading the past two days has pulled the S&P back up above the week 5 EMA line which it dropped down through on Monday as shown in the top chart with the red line. This tractor program has also pulled the S&P back up close to its maximum extension again as shown in the chart below.
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Looking at this over-extension chart we see that Wednesday's close is 212 points above the 324 day EMA line with the average over-extension being +219 points over the past two years. If they keep the tractor program running they could grind the S&P another 10-15 points higher until the tether line is stretched absolutely as far as it can be from the 324 line.
This situation of having the market this over extended but not quite to its absolute max has produced a low volume environment where no one wants to buy but no one wants to short either.
This situation of having the market this over extended but not quite to its absolute max has produced a low volume environment where no one wants to buy but no one wants to short either.
Trade well my friends
Alan
